Agency Gets Law Changed After Criticism

HARTFORD, Conn. (AP) _ A quasi-public state economic development agency faulted by government auditors for the past five years for violating financial reporting requirements has taken care of the problem by getting the Legislature and the governor to change state law.

The auditors said the Connecticut Development Authority, or CDA, since at least the 2004 fiscal year failed to disclose certain financial information about companies that received millions of dollars in loans and tax breaks from the agency, despite annual reports by the auditors since 2006 telling the agency it was violating the reporting requirements in state law.

But CDA officials said they disagreed with the auditors’ interpretation of the law and didn’t want to harm private companies they were trying to help by revealing their sensitive financial information. Agency officials also said the law conflicted with exemptions under the state Freedom of Information Act for certain financial records.

After several years of trying to get the statute changed, the CDA succeeded this year. A proposal to allow the agency to conceal the identities of companies when listing revenue, wage and benefit figures in annual reports was added in the last days of the legislative session in June to a large bill titled “An Act Concerning the Continuance of the Majority Leaders’ Job Growth Roundtable,” which was approved by the Legislature and signed by Democratic Gov. Dannel P. Malloy in July.

CDA President Marie O’Brien said this week agency officials “always felt we were in compliance.”

“The key is the interpretation by other entities like public auditors,” O’Brien said. “In order to finally answer absolutely their concerns … we pursued the legislative change.”

The Connecticut AFL-CIO had opposed limiting the agency’s disclosure requirements. The labor organization supported another bill that died this year that would have required the CDA and another quasi-public economic development agency, Connecticut Innovations Inc., to disclose more information about the companies they were giving money to.

“It is simply a matter of transparency,” Lori Pelletier, secretary and treasurer of the state AFL-CIO, told lawmakers during a public hearing on the failed bill. “The public should be able to review this information.”

Pelletier said in an interview this week, “Why shouldn’t companies getting state grants and loans have to disclose their financial information?”

The law that was changed had required the CDA to list in its annual reports the gross revenue, employee wage rates and benefit levels for every company that received aid from the agency. CDA Executive Director Antonio Roberto said the legislative intent of the law was for the agency to publicly show what kind of companies it was giving loans and tax breaks to.

The CDA reported the revenue, wage and benefit data for each company, but their identities were concealed by listing them as Company A, Company B and so on. It’s unclear how much money those companies received from the agency.

The CDA, however, does list elsewhere in its reports company names and how much they received, minus the revenue, wage and benefit information.

In CDA’s latest annual report for the 2010 fiscal year, for example, one business that received aid, called Company T, had $87 billion in annual revenue. On the other end of the scale, Company GG had about $33,000 in annual revenue.

State Auditor John Geragosian said his office has no authority to force agencies to comply with reporting rules.

“We see if the agencies are complying with statutes. In this case, CDA wasn’t,” Geragosian said. “We believe in the public getting the information it needs about its government. We believe transparency is a good thing.”

Asked about this year’s change to CDA’s reporting requirements, he said, “I assume we will not have another finding (against CDA).”

The changed law requires CDA to report revenue, wage and other data for private companies, while allowing the agency to conceal their identities. The governor and top legislators can examine the hidden information if they request it from the agency.

State Sen. Gary LeBeau, D-East Hartford and co-chairman of the Commerce Committee, supported the change. He said if CDA officials were forced to reveal sensitive financial information, “they would really impede their reason for being, which is to help companies succeed and survive in Connecticut.”

“It would have hurt companies that took help from the state,” he said.

The CDA’s board of directors approved more than $10 million in loans during the 2011 fiscal year, which ended June 30, according to a new audit by a private firm. The agency, which has more than $90 million in net assets, received about $116 million in state bonding, mostly in the 1990s, to start its economic development efforts and now completely pays for itself, agency officials said.

O’Brien said the agency has helped create or retain nearly 108,000 jobs in Connecticut since 1991.

The CDA had an operating loss of more than $3 million in the 2011 fiscal year and a $1.7 million loss in the 2010 fiscal year, with a large portion of the losses coming from losing money on running the XL Center sports arena in Hartford, financial documents show.

In a report released last June, the state auditors said the CDA wrote off about $1.3 million in loans in the 2010 fiscal year.